Better data flow saves $2m-$3m per 1000 staff

Walmart’s ability to respond quickly to demands for flags after the September 11, 2001, attacks gave it a big competitive advantage.
Photo: Michele Mossop

by
Sally Rose

Within an hour of two planes flying into the twin towers of N ew York’s World Trade Centre on September 11, 2001, Walmart had placed an order with its supplier for extra stocks of American flags.

Having a fully automated stock control system gave the company a competitive advantage because it was the first to respond to the trend of a massive spike in flag sales that continued over the coming weeks and months.

Target’s system placed its orders within a day, but even that delay meant reduced margins because its supplier of choice had already committed all its stock to Walmart. Kmart’s stock control system was on a weekly cycle and so by the time it got around to ordering additional supplies none of the wholesalers had any flags left.

Michael Gonzales, an instructor with The Data Warehousing Institute in the US who holds a doctorate in organisational analytics, shared this anecdote with C3 Business Solutions managing director Conrad Bates during a recent trip to Australia.

Bates says demand for improved information management infrastructure from the financial services sector has increased since the 2008 financial crisis. Meanwhile, the challenges of climate change, social security and health are driving demand from government clients, and decreasing discretionary spending is creating a big push in the retail sector to understand consumer behaviour better.

“When the economy gets constrained businesses become more introspective so the C3 business model is anti-cyclical to economy," he says. "Most clients want to improve because they are rich in data but poor in information."

One of the earliest and most important steps is to “group like reporting" he says. “In one instance, five separate parts of the business were all doing supply chain reporting."

Business development managers usually instigate information management overhauls because they want to increase sales or grow the supply chain capability “but it appeals to CFOs because it’s a way to save money".

Related Quotes

Company Profile

C3’s clients “normally sign an investment plan of $20 million over a four-year period to save $30 million", says Bates. Every month the client can decide whether to harvest the savings or reinvest them. “More often than not, about 70 per cent of the time, they go for a reinvestment plan."

Bates has found that in companies with between 1000 and 10 000 employees, on average “for every 1000 employees there’s roughly between $2 to $3 million per annum of inefficient spend on reporting". This is work being done manually, often with areas of duplication which could be automated.

More mature organisations that have already spent considerable time and effort streamlining reporting tend to expect they will find very little fat to trim. But Bates has found that many organisations which assess themselves highly on a scale for the maturity of their information management are still missing the opportunity for big savings. “One client in the financial services client that expected zero opportunities for savings were right on the median and got $3 million," he says.

Projects to improve information management systems often begin with reducing the staff hours required to perform manual processes. But they rarely result in job losses, because what tends to happen is that once those people are relieved of that manual work, they create more value.

“Typically a bunch of people go from being data collectors to business analysts so they tend to not reduce staff," he says. “But it’s never really clear at the outset what value those staff hours would be capable of creating."

Cloud computing means large-scale business intelligence projects are now viable for many more organisations because data can be uploaded to virtualised servers that can be rented by the hour. This means companies can do the sorts of big data analysis that wouldn’t have been possible before without a massive investment in IT infrastructure.

Bates recently worked with a retail client which uploaded “four years worth of point of sale data" to the cloud, enabling it to be manipulated into useful information.

But many businesses are still storing their data on a server in the basement and don’t have the network bandwidth to upload it to the cloud. This problem has created a business opportunity for Bates, who is launching a new cloud-based hosted version of his product C3 Integrity.

Better information management systems also make it easier to exchange information between different users such as when “state and federal government departments want to do a data handshake" says Bates.

It also opens up the possibility of integrating enterprise information with external data-sets that can create a much richer picture.

“There are lots very useful data-sets available from www.data.gov.au – including sources such as the Australian Bureau of Statistics, the Electoral Commission and the Bureau of Meteorology – that can be overlaid on to maps," says Bates.